Euro drops after weak EU inflation and retail sales

The euro dropped against the US dollar after the subdued inflation data from the European Union. According to Eurostat, consumer prices in the EU dropped by 0.3% in December while the core CPI increased by just 0.2%. These numbers are substantially below the 2% target set by the European Union. Also, retail sales in the bloc disappointed as they dropped by 6.1% in November after rising by 1.4% in the previous month. Meanwhile, sentiment in the services sector dropped to -17.4 from -17.0 as companies worried about the new wave of the virus. 

The British pound also dropped against the US dollar after the relatively weak construction PMI from the UK. According to Markit, the overall construction PMI dropped to 54.6 from the previous 54.7. This performance was lower than the consensus estimates of 55.0 and was mostly due to the pandemic. The UK is also facing a challenge due to the rising number of coronavirus cases, which has forced the government to announce a new lockdown. 

The Australian dollar fell today after the mixed trade numbers. According to the Australian Bureau of Statistics, the total exports increased by 3% in November after rising by 5% in the previous month. Imports, on the other hand, rose by 10% after rising by 1% in October. In total, the trade surplus narrowed from $A7.4 billion to more than $A5.02 billion. Elsewhere, in the United States, exports rose to $184 billion in November while imports rose to $252 billion. This pushed the overall trade deficit to more than $68 billion. Further, last week, initial jobless claims dropped to 787,000 from 790,000 the week before.

EUR/USD

The EUR/USD pair declined to an intraday low of 1.2246, which is substantially lower than this week’s high of 1.2347. On the four-hour chart, the pair has moved below the 25-day and 15-day exponential moving averages. Further, it has moved below the ascending trendline that is shown in red. Other indicators like the Relative Strength Index (RSI) and MACD have also started to fall. Therefore, the pair is likely to decline further ahead of the nonfarm payroll number.

GBP/USD

The GBP/USD pair dropped to an intraday low of 1.3568 after the weak UK construction PMI data. On the hourly chart, the pair has moved below the important resistance level at 1.3625. It has also moved below the 25-day exponential moving average while the moving average Of oscillator has dropped below the neutral line. Therefore, the pair will likely continue falling with the next support being at 1.3540.

GER30

The DAX index soared to an all-time high as investors predicted more stimulus in the United States. It is trading at 13,920, which is higher than the envelopes and Parabolic SAR indicators. The Stochastic oscillator has started moving lower while the RSI is slightly below the overbought level. Therefore, while the bullish trend will likely continue, there is also a possibility that the price will pull back to 13,562.